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Southern agriculture looks for its place in `new economy'

Paul Hollis | Oct 18, 2000

Where does Southern agriculture fit into the "New Economy" - that economy best characterized by high technology and a transition in the United States from manufacturing and production to service industries.

Some would argue that agriculture, especially Southern agriculture, has been left behind by the New Economy, and that's a reasonable assessment considering market conditions in recent years.

Two University of Georgia economists - William Givan and William Segars - take a revealing look at the current status of Southern agriculture in a thought-provoking paper entitled, "Is U.S. (And Southern) Agriculture Following the New Economy?"

Low prices for major crop commodities and disastrous weather conditions are obvious problems currently confronting Southern agriculture, say the authors. An alarming trend is that government assistance is making up a larger proportion of total crop value. Government payments plus insurance equaled about one-third of the total value of Georgia's crops in 1999, and more assistance is expected for farmers this year.

Company mergers and industrialization also have played a role in agriculture's current status, say the researchers. For instance, 10 fertilizer companies in North America produced 50 percent of the fertilizer market in 1980. Today, three companies control the same proportion of the market. Nitrogen, in 1980, was produced by 17 companies, providing 70 percent of the market. Today, eight companies control this market. And these numbers change on almost a daily basis as mergers and rumors of mergers continue in agribusiness.

The authors also take a look at the factors that distinguish Southern agriculture from farming in other parts of the country. The Southern United States has a unique climate, and an infrastructure in place that won't be completely removed in the future, say the economists. But, there will be further changes, they suggest.

Much of the Southern region is not suited for growing soybeans or corn unless market prices are well above traditional price levels, contend the authors. Cotton, on the other hand, generally is well suited for the Southern climate but is relatively expensive to grow. It involves one-dimensional harvest equipment, and cotton gins don't have alternative uses. Given the type of programs in place for cotton, the crop is relatively profitable.

Farming in many of the Southern states has "existed" on program crops - primarily peanuts and tobacco - and cane for sugar, according to the paper. These crops generally have been more profitable than other crops.

Some of these commodity programs will go the way of programs for major grains and cotton, and this will mean fewer profits for Southern farmers. Losing programs for traditional Southern crops means losing money that cannot be replaced, note the economists. For example, it would take seven acres of cotton or 67 acres of soybeans, both irrigated, to equal the profit from one acre of tobacco.

Receipts from vegetables in Georgia has tripled in the past 15 years, but there's a limit to the amount that can be consumed, say Givan and Segars. Many farm operators have done very well growing vegetables, but vegetables - with their wide price fluctuations - can't be counted on to solve the entire problem.

There are those who say that Southern land is best suited for growing pine trees rather than crops, say the authors. And, this may be true for some locations. But there is no positive cash flow for 15 to 20 years when pine trees are planted, and this type of farming takes a toll on local economies, they contend.

So where do Southern farmers fit into this New Economy? Looking at the tendency towards further processing and more food products, it seems logical, according to the economists, to think that Southern farmers may well fit somewhere in one of the following options:

(1.) The vertical integration process, as in pork, broiler and beef production; 2.) Growing specialty or niche commodities; or 3.) Producing traditional commodities but only if they are as competitive as producers elsewhere.